<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

--------------------------------------------------------------------------------

                                   FORM 10-Q


[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2000

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For The Transition Period From _____ To _____

                         Commission File Number 0-26115

                                INTERLIANT, INC.
                                ----------------
             (Exact Name Of Registrant As Specified In Its Charter)


             Delaware                                  13-3978980
    --------------------------                     -------------------
     (State of Incorporation)               (IRS Employer Identification No.)

Two Manhattanville Road, Purchase, New York               10577
-------------------------------------------               -----
 (Address of Principal Executive Offices)               (Zip Code)

                                 (914) 640-9000
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

                                      -----
      (Former Name, Former Address and Former Fiscal Year, if Changed Since
                                  Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes X   No   , and (2) has been
                                                 ---    ---
subject to such filing requirements for the past 90 days. Yes X   No   .
                                                             ---    ---

The number of shares outstanding of the Registrant's Common Stock as of August
1, 2000 was 47,832,521.

--------------------------------------------------------------------------------
<PAGE>

                               INTERLIANT, INC.

                                     INDEX


                                                                   PAGE NO.
                                                                   --------

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of
  June 30, 2000 and December 31, 1999                                 1

Condensed Consolidated Statements of Operations
  for the Three Months and Six Months Ended June 30, 2000 and 1999    2

Condensed Consolidated Statements of Cash Flows
  for the Six Months Ended June 30, 2000 and 1999                     3

Notes to Condensed Consolidated Financial Statements                  4

Item 2.  Management's Discussion and Analysis of Financial
  Condition and Results of Operations                                 9


PART II. OTHER INFORMATION                                           17

Item 2.  Changes in Securities and Use of Proceeds

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8-K
<PAGE>

PART I.  FINANCIAL INFORMATION

                                INTERLIANT, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                      June 30,                December 31,
                                                                                        2000                      1999
                                                                                ---------------------     ---------------------
                                                                                     (unaudited)
<S>                                                                               <C>                       <C>
Assets                                                                                                           Note 2
Current assets:
 Cash and cash equivalents                                                              $ 47,355,894              $ 27,608,039
 Restricted cash                                                                             906,843                 1,011,772
 Short-term investments                                                                  107,177,169                 3,612,229
 Accounts receivable, net of allowance of $1,666,000 and
  $1,378,000 at June 30, 2000 and December 31, 1999, respectively                         27,684,908                13,981,358
 Prepaid and other current assets                                                          8,060,273                 3,469,763
 Payroll and benefit funds held for customers                                              3,094,465
                                                                                ---------------------     ---------------------
      Total current assets                                                               194,279,552                49,683,161
                                                                                ---------------------     ---------------------

 Fixed assets, net                                                                        47,594,037                18,199,010
 Intangibles, net                                                                        136,849,237                93,636,201
 Other assets                                                                              7,094,727                 1,356,696
                                                                                ---------------------     ---------------------
      Total assets                                                                     $ 385,817,553             $ 162,875,068
                                                                                =====================     =====================

Liabilities and stockholders' equity
 Current liabilities:
  Notes payable and current portion of long-term debt                                    $ 4,155,787               $ 1,211,835
  Accounts payable and accrued expenses                                                   29,232,547                15,701,591
  Deferred revenue                                                                         9,137,959                 5,883,549
  Payroll and benefit funds held for customers                                             3,094,465
                                                                                ---------------------     ---------------------
      Total current liabilities                                                           45,620,758                22,796,975
                                                                                ---------------------     ---------------------

Long-term debt, less current portion                                                      12,773,066                 2,503,211
7% Convertible Subordinated Notes                                                        164,825,000
Minority interest in subsidiary                                                            6,891,135

Stockholders' equity:
  Preferred stock, $.01 par value; 1,000,000 shares authorized; 0 shares
     issued and outstanding
  Common stock, $.01 par value; 200,000,000 shares authorized;
     47,803,914, and 44,601,141 shares issued and outstanding
     at June 30, 2000 and December 31, 1999, respectively                                    478,039                   446,011
  Additional paid-in capital                                                             287,809,645               201,922,128
  Accumulated deficit                                                                   (132,329,119)              (64,822,097)
  Accumulated other comprehensive income                                                    (250,971)                   28,840
                                                                                ---------------------     ---------------------
      Total stockholders' equity                                                         155,707,594               137,574,882
                                                                                ---------------------     ---------------------

      Total liabilities and stockholders' equity                                       $ 385,817,553             $ 162,875,068
                                                                                =====================     =====================
</TABLE>
     See accompanying notes to condensed consolidated financial statements.

                                       1
<PAGE>

                                INTERLIANT, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                         Three Months Ended                          Six Months Ended
                                                             June 30,                                    June 30,
                                               --------------------------------------      -------------------------------------
                                                     2000                 1999                   2000                1999
                                               ------------------   -----------------      -----------------   -----------------
<S>                                               <C>                 <C>                    <C>                 <C>
Revenues:
  Service revenues                                  $ 31,550,994         $ 10,647,650          $ 52,991,679        $ 16,081,813
  Product revenues                                     7,057,601                                 12,475,082
                                               ------------------   -----------------      -----------------   -----------------
    Total revenues                                    38,608,595          10,647,650             65,466,761          16,081,813

Costs and expenses:
  Cost of service revenues                            21,973,263           6,088,440             35,957,647           9,339,143
  Cost of product revenues                             6,267,821                                 10,817,055
  Sales and marketing                                 11,954,227           4,072,779             19,953,347           5,969,136
  General and administrative (exclusive of
    non-cash compensation shown below)                17,533,972           6,241,815             28,873,000          10,479,005
  Non-cash compensation                                3,089,954             567,562              7,543,141           1,135,125
  Depreciation                                         3,908,957           1,400,754              6,375,489           2,100,306
  Amortization of intangibles                         11,996,734           6,190,585             21,312,776           8,784,915
                                               ------------------   -----------------      -----------------   -----------------
                                                      76,724,928          24,561,935            130,832,455          37,807,630
                                               ------------------   -----------------      -----------------   -----------------

Operating loss                                       (38,116,333)        (13,914,285)           (65,365,694)        (21,725,817)
Interest income (expense), net                        (1,129,819)           (168,338)            (1,241,712)           (114,427)
                                               ------------------   -----------------      -----------------   -----------------
Loss before minority interest and cumulative
  effect of accounting change                        (39,246,152)        (14,082,623)           (66,607,406)        (21,840,244)

Minority interest                                        320,096                                    320,096
                                               ------------------   -----------------      -----------------   -----------------

Loss before cumulative effect of accounting
  change                                             (38,926,056)        (14,082,623)           (66,287,310)        (21,840,244)

Cumulative effect of accounting change                                                           (1,219,712)

                                               ------------------   -----------------      -----------------   -----------------
Net loss                                            $(38,926,056)       $(14,082,623)          $(67,507,022)      $ (21,840,244)
                                               ==================   =================      =================   =================

Basic and diluted loss per share:
  Loss before cumulative effect of accounting
    change                                               $ (0.82)            $ (0.44)               $ (1.41)            $ (0.77)
  Cumulative effect of accounting change                       -                   -                  (0.03)                  -
                                               ------------------   -----------------      -----------------   -----------------
  Net loss                                               $ (0.82)            $ (0.44)               $ (1.44)            $ (0.77)
                                               ==================   =================      =================   =================


Weighted average shares outstanding - basic and
  diluted                                             47,624,787          31,968,991             46,807,127          28,369,440
                                               ==================   =================      =================   =================
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>

                                INTERLIANT, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                            Six Months Ended
                                                                                                 June 30,
                                                                              ----------------------------------------------
                                                                                     2000                      1999
                                                                              --------------------      --------------------
<S>                                                                                 <C>                        <C>
Operating activities
  Net cash used in operating activities                                             $ (32,600,343)             $ (7,000,626)
                                                                              --------------------      --------------------

Investing activities
  Purchases of fixed assets                                                           (27,627,835)               (3,238,932)
  Payments issued in connection with non-compete agreements                                                      (1,000,000)
  Investments in restricted securities                                                                             (952,969)
  Purchases of short-term investments, net                                           (103,564,940)
  Acquisitions of businesses, net of cash acquired                                    (22,002,098)              (20,701,570)

                                                                              --------------------      --------------------
  Net cash used in investing activities                                              (153,194,873)              (25,893,471)
                                                                              --------------------      --------------------

Financing activities
  Proceeds from sale of common stock                                                   27,500,000                11,000,000
  Proceeds from issuance of Series A redeemable convertible preferred stock                                      13,000,000
  Proceeds from issuance of 7% Convertible Subordinated Notes                         164,825,000
  Proceeds from exercise of options and warrants                                        1,553,656                 5,098,518
  Proceeds from issuance of debt and capital lease financing                           12,911,802                 1,277,255
  Repayment of debt and capital leases                                                 (1,476,032)                 (243,870)
  Minority investment in subsidiary                                                     7,211,231
  Offering costs                                                                       (6,982,586)                 (781,675)

                                                                              --------------------      --------------------
  Net cash provided by financing activities                                           205,543,071                29,350,228
                                                                              --------------------      --------------------

Net increase in cash and cash equivalents                                              19,747,855                (3,543,869)
Cash and cash equivalents at beginning of period                                       27,608,039                 6,813,360
                                                                              --------------------      --------------------
Cash and cash equivalents at end of period                                           $ 47,355,894               $ 3,269,491
                                                                              ====================      ====================
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                                Interliant, Inc.

              Notes to Condensed Consolidated Financial Statements
                           June 30, 2000 (unaudited)

1.   BUSINESS

     Interliant, Inc. (the Company) is a leading Application Service Provider
(ASP), providing customers with a broad range of outsourced e-business
solutions.  The Company's service offerings combine hosting infrastructure with
Internet professional service expertise, which enable the rapid design,
implementation, deployment and management of cost-effective e-business solutions
for customers.

     The Company was organized under the laws of the State of Delaware on
December 8, 1997. Web Hosting Organization LLC (WEB), a Delaware Limited
Liability Company, is the majority and controlling shareholder of the Company.
WEB's investors comprise Charterhouse Equity Partners III, L.P. and Chef
Nominees Limited (collectively, CEP Members), and WHO Management, LLC (WHO).


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The condensed consolidated financial statements include the accounts of the
Company and its wholly and majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Interim Financial Information

     The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the regulations of the Securities and
Exchange Commission (SEC), but omit certain information and footnote disclosure
necessary to present the statements in accordance with accounting principles
generally accepted in the United States.  The interim financial information as
of June 30, 2000 and for the three and six month periods ended June 30, 2000 and
1999 is unaudited and has been prepared on the same basis as the audited
consolidated financial statements.  In the opinion of management, such unaudited
information includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the interim information.

     The balance sheet at December 31, 1999 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

     For further information, refer to the Financial Statements and Notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K.
Operating results for the three and six month periods ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.

Payroll and Benefit Funds Held for Customers

     As part of its payroll and payroll tax filing services, the Company
collects funds for federal, state and local employment taxes from its customers.
The Company also collects funds

                                       4
<PAGE>

for medical claims and processes payments for its customers. The Company
receives deposits from customers for payroll tax deposits and payment of benefit
claims in advance of disbursing the funds. Related liabilities are recorded for
funds held. All customer funds are held in accounts separate from the Company's
general operating funds.

New Accounting Standards

     In December 1999, the SEC issued Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements" (SAB 101), which provides guidance related
to revenue recognition based on interpretations and practices followed by the
SEC.  SAB 101 allows companies to report any changes in revenue recognition
related to adopting its provisions as an accounting change at the time of
implementation in accordance with APB Opinion No. 20, "Accounting Changes."  The
Company recorded a cumulative effect change in accounting principle, effective
January 1, 2000, for revenue recognized in 1999 for set up fees associated with
Web hosting and application hosting services.  Effective January 1, 2000 such
fees are being amortized over one year, which generally represents the longer of
the contractual period or expected life of the customer relationship.  For the
six months ended June 30, 2000, the Company recorded a cumulative effect charge
of $1.2 million to reflect the change in accounting principle.

     In April 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation", an Interpretation of APB No. 25.  The Company believes the
adoption of this new accounting standard will not have a significant effect on
its financial position or results of operations.

Use of Estimates

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent liabilities, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.  Actual results could differ from those estimates.

Net Loss Per Share

     Net loss per share is presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
Basic net loss per share is computed based on the weighted average number of
shares of common stock outstanding during the period.  Diluted loss per share
does not differ from basic loss per share since potential common shares to be
issued upon the exercise of stock options are anti-dilutive for the periods
presented.


3.   ACQUISITIONS

     During the six months ended June 30, 2000, the Company consummated the
following acquisitions, each of which has been accounted for using the purchase
method of accounting:

     In February 2000, the Company acquired all of the outstanding stock of Soft
Link, Inc., a provider of Enterprise Resource Planning (ERP) solutions based on
PeopleSoft software.  The purchase price consisted of $18.1 million in cash and
254,879 shares of the Company's common stock (Common Stock) valued at
$36.80 per share. The agreement provides for contingent consideration, not to
exceed $10.0 million, if specified revenues and earnings targets are met for the
calendar year 2000. The contingent consideration is payable 50% in cash, and the
remaining 50% in cash or Common Stock at the Company's option. The payment of
contingent consideration, if any, will be recorded as additional purchase price.

                                       5
<PAGE>

     In February 2000, the Company purchased substantially all of the assets and
assumed certain liabilities of reSOURCE PARTNER, Inc., a provider of hosting and
implementation services for outsourced human resources and finance solutions
primarily using PeopleSoft software.  The purchase price consisted of $2.5
million in cash and the issuance of 1,041,179 shares of Common Stock valued at
approximately $36.80 per share.

     In May 2000, the Company, through its subsidiary Interliant International,
Inc. (International), formed Interliant Europe BV (BV).  The shareholders of BV
are International and @viso Limited (@viso) owning 51% and 49%, respectively, of
the outstanding stock of BV.  International's investment in BV of approximately
$7.6 million was made with the proceeds of a loan from @viso which bears
interest at the rate of 8% per annum and which is payable at the earlier of an
initial public offering of BV or February 28, 2005.  At the option of BV,
interest payable may be added to the principal amount of the loan on each
interest payment date.

     In May 2000, a subsidiary of BV purchased certain data center assets
located in Paris, France and certain hosting customers and intellectual property
from Cegetel Enterprises, SA.  The purchase price was approximately $1.9
million, of which $0.3 million was paid in cash at closing and the balance in
the form of a non interest-bearing note payable in equal quarterly installments
through February 2002.  The entire purchase price has been allocated to the
acquired data center assets.

     In June 2000, the Company purchased all of the outstanding stock of
Knowledge Systems, Inc., an ASP specializing in professional services and
hosting for associations.  The purchase price consisted of $0.9 million in cash,
$0.3 million assumption of seller debt and 46,407 shares of Common Stock valued
at $20.80 per share.  The agreement also provides for contingent purchase
consideration of up to $5.0 million if certain specified hosting revenues and
gross margin targets are achieved for the twelve-month period ending June 2001.
The payment of contingent consideration, if any, will be recorded as additional
purchase price.

     The allocation of purchase price for the acquisitions completed in 2000 as
reflected in the June 30, 2000 condensed consolidated balance sheet is
preliminary in that they are based on the Company's initial assessment of the
fair value of assets acquired.  The allocations may be modified among the
various components of intangible assets as the Company finalizes the purchase
accounting for such acquisitions.

     The following unaudited condensed pro forma information presents the
unaudited results of operations of the Company as if the acquisitions completed
in 2000 and 1999 had occurred on January 1, 1999:

<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                                 June 30,
                                                               ----------------------------------------------
                                                                      2000                     1999
                                                               --------------------    ----------------------
<S>                                                                   <C>                       <C>
    Revenues                                                          $ 74,535,918              $ 63,622,416
    Loss before cumulative effect of accounting change                 (72,944,124)              (40,457,026)
    Loss per share before cumulative effect
       of accounting change - basic and diluted                            $ (1.54)                  $ (1.23)
</TABLE>

4.   DEBT

     In February 2000, the Company sold $154.8 million of 7% Convertible
Subordinated Notes (Notes) in a private placement, including $4.8 million sold
upon exercise of the initial purchasers' over-allotment option.  The Notes are
convertible, at the option of the holder, at any time on or prior to maturity
into Common Stock at a conversion price of $53.10 per share, which

                                       6
<PAGE>

is equal to a conversion rate of 18.8324 shares per $1,000 principal amount of
notes. Interest is payable semi-annually, beginning August 2000. The Notes
mature on February 16, 2005. Upon the occurrence of certain events, the Company
may redeem the Notes prior to maturity.

     In March 2000, the Company sold $10.0 million of 7% Convertible
Subordinated Notes in a private placement.  Such notes have substantially the
same terms as the Notes described above.

     During the six months ended June 2000, the Company financed approximately
$5.3 million of computer equipment with Dell Financial Services under capital
lease arrangements.  The leases are payable in monthly installments over 24
months, with interest rates of approximately 15% per annum.


5.   STOCKHOLDERS' EQUITY

Common Stock

     In January and February 2000, the Company sold an aggregate of 787,881
shares of Common Stock in private placements to three purchasers for total
proceeds of $27.5 million.  In connection with the sales, the Company issued
warrants to purchase 157,575 shares of Common Stock at an average exercise price
of $34.90 per share, which approximated the market price of the Company's Common
Stock at the date of issuance.  The warrants expire December 31, 2000.

Stock Option Plan

     In June 2000, the shareholders of the Company approved an increase in the
number of shares of Common Stock available under the 1998 Stock Option Plan
(Plan) from 3,800,000 shares to 8,500,000.

     During the six months ended June 30, 2000, under the Plan, the Company
granted options to purchase 2,095,678 shares of Common Stock at exercise prices
ranging from $15.81 to $43.38 per share.  The weighted-average exercise price of
the options granted was $21.58 per share.

     During the six months ended June 30, 2000, options to purchase 1,021,124
shares of Common Stock were exercised.  As of June 30, 2000, options to purchase
3,383,501 shares of Common Stock were outstanding, of which 307,753 options were
vested.

     In January 2000, the Company entered into a four-year employment agreement
with a new Chief Executive Officer.  In connection with this agreement, the
Company issued this employee options to purchase 1,500,000 shares of Common
Stock at an average exercise price of $18.00 per share.  Such options were not
issued pursuant to the Plan.  The average exercise price of the options was
below the fair value of the Common Stock as of the measurement date, and as a
result, the Company will recognize approximately $30.0 million as compensation
expense over the four-year vesting period of the options.  For the six months
ended June 30, 2000, the Company expensed $6.3 million under this arrangement.

Employee Stock Purchase Plan

     In June 2000, the shareholders of the Company approved the adoption of the
2000 Employee Stock Purchase Plan (ESPP), effective July 2000, which provides
for the sale of up to 1,500,000 shares of Common Stock to eligible participating
employees of the Company through periodic payroll deductions.  The purchase
price of the shares is the lesser of 85 percent of the Common Stock's fair
market value on the first day of the purchase period or the last day of the

                                       7
<PAGE>

purchase period for each six-month purchase period. The Company intends for the
ESPP to qualify as an "employee stock purchase plan" under section 423 of the
Internal Revenue Code of 1986, as amended.

6.   SEGMENT INFORMATION

     The Company currently has three reportable segments: Web hosting,
application hosting, and ASP professional services. The summary unaudited
results of operations for the six months ended June 30, 2000 and 1999 for each
of the segments is shown below.

<TABLE>
<CAPTION>
                                                      Six Months Ended
                                                          June 30,
                                           ---------------------------------------
                                                 2000                  1999
                                           ------------------     ----------------
                                                       (in thousands)
<S>                                                <C>                   <C>
Revenues:
  Application hosting                               $ 16,883              $ 6,045
  Web hosting                                         12,515                6,732
  ASP professional services                           34,967                2,068
  Other                                                1,102                1,237
                                           ------------------     ----------------
    Total                                           $ 65,467             $ 16,082
                                           ==================     ================

Operating income (loss):
  Application hosting                              $ (10,710)            $ (1,537)
  Web hosting                                         (8,544)              (6,108)
  ASP professional services                            2,077                 (313)
  Other                                              (48,188)             (13,768)
                                           ------------------     ----------------
    Total                                          $ (65,365)           $ (21,726)
                                           ==================     ================

                                               June 30, 2000    December 31, 1999
                                          ------------------    -----------------
Segment assets:
  Application hosting                               $ 33,323             $ 11,223
  Web hosting                                         43,809                7,716
  ASP professional services                           26,121               11,704
  Other                                              282,565              132,232
                                           ------------------     ----------------
    Total                                          $ 385,818            $ 162,875
                                           ==================     ================
</TABLE>

     The Company's management generally reviews the results of operations of
each segment exclusive of depreciation and amortization (aggregating $27.7
million and $10.9 million, respectively, for the six months ended June 30, 2000
and 1999) and interest related to each segment.  Accordingly, such expenses are
excluded from the segment operating loss and are shown under the Other caption.
In addition, all intangible assets and corporate expenses of the Company are
included in the Other caption.

     The Company believes that the reportable segments may change in future
periods as management continues to integrate acquisitions and further develop
and enhance its service offerings.

                                       8
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following description of our financial condition and results
of operations in conjunction with the Unaudited Condensed Consolidated Financial
Statements and the Notes thereto.  This discussion contains forward-looking
statements based upon current expectations that involve risks and uncertainties.

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS

     This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended.  Certain forward-looking statements
relate to, among other things, future results of operations, profitability,
growth plans, sales, expense trends, capital requirements and general industry
and business conditions applicable to our business.  Any statements contained
herein that are not statements of historical fact may be deemed to be forward-
looking statements.  Our actual results and the timing of certain events may
differ significantly from the results discussed in the forward-looking
statements.  These forward-looking statements are based largely on our current
expectations and are subject to a number of risks and uncertainties. The words
"anticipate," "believe," "estimate" and similar expressions used herein are
generally intended to identify forward-looking statements.  In addition to the
other risks described elsewhere in this report and in other filings by the
Company with the Securities and Exchange Commission, important factors to
consider in evaluating such forward-looking statements include but are not
limited to: changes in external competitive market factors; changes in our
business strategy; an inability to execute our strategy due to unanticipated
changes in the emerging hosting and Internet services industries or the economy
in general; difficulties in the timely expansion of our network and data centers
or in the acquisition and integration of new businesses; difficulties in
retaining and attracting new employees or customers; difficulties in developing
or deploying new services; risks associated with rapidly changing technology;
and various other competitive factors that may prevent us from competing
successfully in existing or future markets. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained herein will in fact be realized and we assume no obligation to update
this information.

OVERVIEW

     We are a leading application service provider, or ASP, providing our
customers with a broad range of outsourced e-business solutions.  Our customers
face significant challenges in doing business on the Internet due to its
technical complexity, their lack of technical skills, the cost of implementation
and ongoing support and the time necessary to implement solutions.  By providing
comprehensive outsourced solutions that combine our hosting infrastructure with
Internet professional services expertise, we can rapidly design, implement,
deploy and effectively manage cost-effective e-business solutions for our
customers.

     As an ASP, we provide:

     .    hosting infrastructure for our customers' network-based applications,
          which allows our customers to store their databases, applications or
          Web sites on equipment owned and maintained by us or on our customers'
          equipment located in our data centers;

     .    Internet professional services for designing, implementing and
          deploying these network-based applications; and

                                       9
<PAGE>

     .    operations support, systems and applications management and customer
          care for our customers and their end-users.

     Our strategy has been to rapidly acquire operating companies in the Web
hosting, application hosting and Internet professional services businesses, to
build or acquire data centers, and to integrate the acquired hosting operations
into those data centers.  We have acquired 25 operating businesses to date for
total consideration of approximately $194.6 million, including transaction
costs.  We have accounted for all acquisitions using the purchase method of
accounting, which has resulted in the recognition of a substantial amount of
intangible assets on our balance sheet.  Of the total consideration, we paid
$10.2 million of assumed seller debt and have allocated approximately $2.0
million to tangible net assets and $182.4 million to intangible assets, which
comprise covenants not to compete, customer lists, assembled work force, trade
names and goodwill.  In accordance with APB 16, an allocation methodology was
applied to each acquisition to determine the value to be assigned to each type
of intangible asset where appropriate.  Amounts not allocated to net tangible
assets and identifiable intangible assets have been recorded as goodwill.
Recoverability of our investment in intangible assets is dependent on our
ability to operate our businesses successfully and generate positive cash flows
from operations.  Annual charges for amortization of intangible assets with
respect to acquisitions completed to date will be approximately $48.5 million,
which will result in increased losses or reduced net income. The purchase
consideration for the acquisitions was in the form of cash, stock or a
combination of cash, stock and issuance of debt.

     Since our inception in December 1997, we have experienced operating losses
and negative cash flows from operating activities for each quarterly and annual
period.  As of June 30, 2000, we had an accumulated deficit of $132.3 million.
The revenue and income potential of our business is unproven and our limited
operating history makes an evaluation of us and our prospects difficult.  We
anticipate increased operating expenses as we:

     .    significantly expand our sales and marketing initiatives to continue
          to grow our brands;

     .    fund greater levels of product development;

     .    continue to complete and equip our data centers;

     .    implement billing, accounting and customer service systems; and

     .    continue our acquisition program.

     Although we have experienced revenue growth, primarily attributable to
acquisitions, we do not believe that this growth is necessarily indicative of
future operating results. Future acquisitions are expected to increase operating
expenses and operating losses and as a result, we expect to continue to incur
operating losses for the foreseeable future. We cannot be assured that we will
ever achieve profitability on a quarterly or annual basis, or, if achieved, that
we will sustain profitability.

RESULTS OF OPERATIONS

     We derive our revenues from application hosting, Web hosting and Internet
professional and other services.  Application hosting revenues primarily
comprise monthly usage fees per number of end users, including bandwidth fees
and one-time set up fees.  Web hosting revenues consist primarily of hosting
fees and set up fees, which cover costs incurred by us to establish customers'
Web sites.  We provide shared, dedicated and co-located Web hosting.  We charge
our Web hosting customers a fixed amount for bandwidth availability and
incremental fees if those fixed amounts are exceeded.  In addition, our shared
Web hosting customers are also charged for disk space on a server, dedicated
hosting customers are charged for use of one or more dedicated servers and our
co-location customers are charged for the amount of data center space such co-
location customers' servers occupy.  We charge flat rates for our enhanced
Internet services.  Internet professional service charges generally are fee-
based on a time and materials basis.

                                       10
<PAGE>

     Our contracts with our application hosting customers range in length from
month-to-month to three years.  Our contracts with our Web hosting customers
typically range in length from month-to-month to one year.  A large proportion
of our Web hosting customer contracts are cancelable by either party with 30
days' notice.  Revenues derived from hosting are recognized ratably over the
applicable contractual period.  Payments received and billings in advance of
providing services are deferred until such services are provided.  Revenues from
Internet professional services are recognized as the services are rendered.
Substantially all of our Internet professional services contracts call for
billings on a time and materials basis.

     In December 1999, the SEC issued Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements" (SAB 101), which provides guidance related
to revenue recognition based on interpretations and practices followed by the
SEC.  SAB 101 allows companies to report any changes in revenue recognition
related to adopting its provisions as an accounting change at the time of
implementation in accordance with APB Opinion No. 20, "Accounting Changes."  The
Company recorded a cumulative effect change in accounting principle, effective
January 1, 2000, for revenue recognized in 1999 for set up fees associated with
Web hosting and application hosting services.  Effective January 1, 2000 such
fees are being amortized over one year, which generally represents the longer of
the contractual period or expected life of the customer relationship.  For the
six months ended June 30, 2000, the Company recorded a cumulative effect charge
of $1.2 million to reflect the change in accounting principle.

     Cost of revenues consists primarily of salaries and related expenses
associated with Internet professional services and data center operations
personnel, costs of hardware and software products sold to customers, and data
communications expenses, including one-time fees for circuit installation and
variable recurring circuit payments to network providers.  Monthly circuit
charges vary based upon circuit type, distance and usage, as well as the term of
the contract with the carrier.

     Sales and marketing expense consists of personnel costs associated with the
direct sales force, internal telesales, product development and product
marketing employees, as well as costs associated with marketing programs,
advertising, product literature, external telemarketing costs and corporate
marketing activities, including public relations.

     General and administrative expense includes the cost of customer service
functions, finance and accounting, human resources, legal and executive
salaries, corporate overhead, acquisition integration costs and fees paid for
professional services.

THREE MONTHS ENDED JUNE 30, 2000 AND 1999

Revenues

     Revenues increased $28.0 million, from $10.6 million for the three months
ended June 30, 1999 to $38.6 million for the corresponding 2000 period.  The
increase in revenues was due primarily to the 13 acquisitions consummated during
1999 and 2000, and organic growth of approximately 24%.

Cost of Revenues

     Cost of revenues increased by $22.1 million, from $6.1 million for the
three months ended June 30, 1999 to $28.2 million for the corresponding 2000
period.  This increase was due primarily to the 13 acquisitions consummated
during 1999 and 2000, and increased infrastructure costs to support current and
future revenue growth.  In the future, cost of revenues will likely continue to
increase due to capacity utilization, additional investments in existing and new
data centers, changes in the mix of services, fluctuations in bandwidth costs
and increased levels of staffing to support anticipated revenue growth.

                                       11
<PAGE>

     Gross margin for the three months ended June 30, 2000 and 1999 was 26.9%
and 42.8%, respectively. The decline in gross margin is the result of a higher
proportion of revenue from Internet professional services and product sales to
total revenues related to our recent acquisitions of Internet professional
services businesses, which typically generate lower gross margins as compared
with our hosting services.

Sales and Marketing

     Sales and marketing expense increased by $7.9 million, from $4.1 million
for the three months ended June 30, 1999 to $12.0 million for the corresponding
2000 period.  This increase was attributable to the 13 acquisitions consummated
during 1999 and 2000, higher spending associated with our brand marketing
campaign and continued expansion of our direct sales force.  A key component of
our revenue growth strategy is to significantly increase our sales and marketing
activities.  We expect that this will include the continued expansion of our
sales force, increased marketing efforts to grow recognition of our brands, and
the development of reseller and referral partner channels.  As a result, sales
and marketing expenses will increase substantially in future periods to support
anticipated revenue growth.

General and Administrative

     General and administrative expense increased by $13.8 million, from $6.8
million for the three months ended June 30, 1999 to $20.6 million for the
corresponding 2000 period.  This increase in general and administrative expense
was attributable to the 13 acquisitions consummated during 1999 and 2000, a $2.5
million increase in non-cash compensation charges and increased investments in
infrastructure and levels of staffing with respect to the customer service,
billing, accounting and human resources functions to support revenue growth.
Substantial staffing and related increases are expected to continue in future
periods in order to support anticipated revenue growth.

     In February 2000, we issued options to purchase 1,500,000 shares of Common
Stock to our Chief Executive Officer at exercise prices that were below the
market price of our Common Stock at the date of grant.  In total, such options
were valued at approximately $30.0 million, and for the three months ended June
30, 2000, we charged $3.8 million to non-cash compensation expense in connection
with this arrangement.

Depreciation

     Depreciation expense increased by $2.5 million, from $1.4 million for the
three months ended June 30, 1999 to $3.9 million for the corresponding 2000
period.  The increase in depreciation expense was attributable to the 13
acquisitions consummated during 1999 and 2000, our investments in equipment,
furniture and construction to complete and equip our data centers and customer
care facilities, and investments in computer equipment and software to support
customer growth.

Amortization

     Amortization expense increased by $5.8 million, from $6.2 million for the
three months ended June 30, 1999 to $12.0 million for the corresponding 2000
period.  This increase in amortization expense was attributable to the 13
acquisitions consummated during 1999 and 2000.  We expect amortization expense
to increase in future periods as we continue to make additional acquisitions.

                                       12
<PAGE>

SIX MONTHS ENDED JUNE 30, 2000 AND 1999

Revenues

     Revenues increased $49.4 million, from $16.1 million for the six months
ended June 30, 1999 to $65.5 million for the corresponding 2000 period.  The
increase in revenues was primarily due to the 13 acquisitions consummated during
1999 and 2000, and organic growth of approximately 17%.  On a pro forma basis,
giving effect to acquisitions completed through June 30, 2000, revenues for the
six months ended June 30, 2000 were $74.5 million.

     For the six months ended June 30, 2000, on a pro forma basis:

     .    application hosting revenues comprise 29.5% of our revenues;

     .    Web hosting revenues comprise 14.2% of our revenues;

     .    Internet professional services revenues comprise 53.9% of our
          revenues; and

     .    other services revenues comprise 2.4% of our revenues.

Cost of Revenues

     Cost of revenues increased by $37.5 million, from $9.3 million for the six
months ended June 30, 1999 to $46.8 million for the corresponding 2000 period.
This increase was due primarily to the 13 acquisitions consummated during 1999
and 2000 and increased infrastructure costs to support current and future
revenue growth.  In the future, cost of revenues will likely increase due to
capacity utilization, additional investments in existing and new data centers,
changes in the mix of services, fluctuations in bandwidth costs and increased
levels of staffing to support anticipated revenue growth.

     On a pro forma basis, cost of revenues for the six months ended June 30,
2000 were $53.6 million.

     Gross margin for the six months ended June 30, 2000 and 1999 was 28.6% and
41.9%, respectively. The decrease in gross margins are the result of a higher
proportion of revenue from Internet professional services and product sales to
total revenues related to our recent acquisitions of Internet professional
services businesses, which typically generate lower gross margins as compared
with our hosting services.

Sales and Marketing

     Sales and marketing expense increased by $14.0 million, from $6.0 million
for the six months ended June 30, 1999 to $20.0 million for the corresponding
2000 period.  This increase was attributable to the 13 acquisitions consummated
during 1999 and 2000, higher spending associated with our brand marketing
campaign and continued expansion of our direct sales force.  A key component of
our revenue growth strategy is to significantly increase our sales and marketing
activities.  We expect that this will include the continued expansion of our
sales force, increased marketing efforts to grow recognition of our brands, and
the development of reseller and referral partner channels.  As a result, sales
and marketing expenses will increase substantially in future periods to support
anticipated revenue growth.

     Sales and marketing costs as a percentage of revenue was 30.5% and 37.1%
for the six months ended June 30, 2000 and 1999, respectively.  The percentage
decrease is due primarily to a higher proportion of Internet professional
services revenues for the 2000 period, which businesses have historically
incurred lower marketing costs as a percentage of revenues.

                                       13
<PAGE>

General and Administrative

     General and administrative expense increased by $24.8 million, from $11.6
million for the six months ended June 30, 1999 to $36.4 million for the
corresponding 2000 period.  This increase in general and administrative expense
was attributable to the 13 acquisitions consummated during 1999 and 2000, a $6.4
million increase in non-cash compensation charges, and increased investments in
infrastructure and levels of staffing with respect to the customer service,
billing, accounting and human resources functions to support revenue growth.
Substantial staffing and related increases are expected to continue in future
periods in order to support anticipated revenue growth.  Non-cash charges to
operations in connection with the options granted to our Chief Executive Officer
amounted to $6.3 million.

     On a pro forma basis, general and administrative expense for the six months
ended June 30, 2000 was $39.5 million.

Depreciation

     Depreciation expense increased by $4.3 million, from $2.1 million for the
six months ended June 30, 1999 to $6.4 million for the corresponding 2000
period.  The increase in depreciation expense was attributable to the 13
acquisitions consummated during 1999 and 2000, our investments in equipment,
furniture and construction to complete and equip our data centers and customer
care facilities, and investments in computer equipment and software to support
customer growth. On a pro forma basis, depreciation expense for the six months
ended June 30, 2000 was $6.7 million.

Amortization

     Amortization expense increased by $12.5 million, from $8.8 million for the
six months ended June 30, 1999 to $21.3 million for the corresponding 2000
period.  This increase in amortization expense was attributable to the 13
acquisitions consummated during 1999 and 2000.  We expect amortization expense
to increase in future periods as we continue to make additional acquisitions.

     On a pro forma basis, amortization expense for the six months ended June
30, 2000 was $24.3 million.

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations and acquisitions primarily from private
placements of debt and equity, and our initial public offering of common stock.
We had $154.5 million in cash, cash equivalents and short-term investments at
June 30, 2000, including $13.4 million held by Interliant Europe, a consolidated
subsidiary that is 51% owned by us.

     In January and February 2000, we raised $27.5 million in strategic funding
from equity investments by Dell Computer, Network Solutions and BMC Software.
In connection with these sales, we issued warrants to purchase 157,575 shares of
common stock with a weighted average exercise price of $34.90 per share, which
expire on December 31, 2000.  We also entered into commercial agreements with
each of the strategic investors.  We anticipate that these commercial agreements
will result in significant incremental revenues, expenses, EBITDA losses and
capital expenditures for the foreseeable future in the expectation that
eventually they will result in positive EBITDA and profits.  The foregoing is a
forward-looking statement and is based on our current business plan and the
assumptions on which that plan is based.

     In February 2000, we sold $154.8 million of 7% Convertible Subordinated
Notes in a private placement, including $4.8 million sold upon exercise of the
initial purchasers' over-

                                       14
<PAGE>

allotment option. The notes are convertible, at the option of the holder, at any
time on or prior to maturity, into Common Stock at a conversion price of $53.10
per share, which is equal to a conversion rate of approximately 18.8324 shares
per $1,000 principal amount of notes. Semi-annual interest payments of $5.4
million commence in August 2000. The notes mature on February 16, 2005. Upon the
occurrence of certain events, we may redeem the notes prior to maturity.

     In March 2000, we sold $10.0 million of 7% Convertible Subordinated Notes
in a private placement with Microsoft.  Such notes have substantially the same
terms as the notes described above.  We also entered into a commercial agreement
with Microsoft to develop application hosting services for Microsoft-based
platforms. We anticipate that this commercial agreement will indirectly result
in significant incremental revenues, expenses, EBITDA losses and capital
expenditures for the foreseeable future in the expectation that eventually it
will result in positive EBITDA and profits.  The foregoing is a forward-looking
statement and is based on our current business plan and the assumptions on which
that plan is based.

     We completed four acquisitions during the six months ended June 30, 2000
(see Note 3 of Notes to Condensed Consolidated Financial Statements for the six
months ended June 30, 2000, included in Part I of this Form 10-Q).  The total
cash consideration for these acquisitions was $21.7 million, net of acquired
cash.

     During the six months ended June 30, 2000, we acquired $27.6 million of
computer equipment and software, furniture and leasehold improvements.  Such
fixed asset additions were primarily driven by our data center and customer care
facilities' expansion and customer-driven computer equipment and software
purchases to support revenue growth.  We have a $25 million lease facility with
Dell Financial Services (DFS), under which we are financing Dell equipment
purchases.  As of June 30, 2000 approximately $5.3 million of computer equipment
was financed under the DFS facility.  We expect to continue such financing
activities and obtain additional equipment financing, although no assurances can
be given that additional financing will be available when needed.

     In addition to funding ongoing operations and capital expenditures, our
principal commitments consist of non-cancelable operating leases and contingent
payments of earnouts to certain sellers of operating companies acquired by us.
In connection with certain acquisitions, we paid $2.0 million during the six
months ended June 30, 2000.  If all targets for earnouts entered into through
June 30, 2000 are achieved in full, total consideration pursuant to these
earnouts will be $4.5 million and $21.5 million in cash in 2000 and 2001,
respectively.  Certain agreements provide for issuance of common stock in lieu
of cash, at our option.

     We currently believe that our existing cash and cash equivalents, together
with the net proceeds from the investments by strategic partners and the sale of
the notes described above, will be adequate to meet operating needs through
2001, subject to the use of additional cash for potential unspecified
acquisitions not anticipated in our operating plans, in which case the period
would be shortened.  The foregoing is a forward-looking statement and is based
on our current business plan and the assumptions on which it is based, including
our ability to successfully integrate acquisitions and achieve the expected
benefits, such as operational efficiencies and revenue improvements from cross-
selling opportunities.  Our plans also assume that we will complete a given
number of acquisitions, at given valuations using as consideration a mix of cash
and stock.  If our plans change or our assumptions prove to be inaccurate, we
may be required to seek additional capital sooner than we currently anticipate.
We may also seek to raise additional capital to take advantage of favorable
conditions in the capital markets.  It is likely that after 2001 we will need
additional funds to conduct our operations, continue our acquisition and
internal growth programs, and fund debt service obligations. In order to fund
the repayment of our existing debt service obligations, we will either have to
increase revenues without a commensurate increase in costs to generate
sufficient cash from operations, refinance existing debt obligations, raise
additional equity, or execute a combination thereof.  We cannot

                                       15
<PAGE>

be assured, however, that if we need or seek additional capital that we will be
successful in obtaining it.

Interest Rate Risk

     We have limited exposure to financial market risks, including changes in
interest rates. At June 30, 2000, we had short-term investments of approximately
$107.2 million. These short-term investments consist of highly liquid
investments in debt obligations of highly rated entities with maturities of
between 90 days and one year. These investments are subject to interest rate
risk and will fall in value if market interest rates increase. We expect to hold
these investments until maturity, and therefore expect to realize the full value
of these investments, even though changes in interest rates may affect their
value prior to maturity. If interest rates decline over time, this will result
in a reduction of our interest income by approximately $1.0 million annually for
each percentage decrease, based on the amount of short-term investments on hand
as of June 30, 2000.

     Substantially all of our indebtedness bears interest at a fixed rate to
maturity which therefore minimizes our exposure to interest rate fluctuations.

                                       16
<PAGE>

PART II.   OTHER INFORMATION

                                INTERLIANT, INC.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS.

(c)  In the six months ended June 30, 2000, options to purchase 1,021,124 shares
of Common Stock were exercised at a weighted average exercise price of $1.54 per
share.

     In January and February 2000, Interliant sold an aggregate of 787,881
shares of Common Stock to six strategic partners for a total purchase price of
$27.5 million.  In connection with these sales, Interliant issued warrants to
purchase an aggregate of 157,575 shares of common stock with a weighted average
exercise price of $34.90 per share.

     In February 2000, Interliant sold an aggregate principal amount of $154.8
million of 7% Convertible Subordinated Notes to the initial purchasers and in
March 2000, Interliant sold an aggregate principal amount of $10.0 million of
the same 7% Convertible Subordinated Notes to Microsoft Corporation.

     In February 2000, in connection with the acquisition of Soft Link, Inc,
Interliant issued, as partial consideration, 254,879 shares of Common Stock to
certain stockholders of SoftLink, Inc.

     In February 2000, in connection with the purchase of substantially all of
the assets and assumption of certain liabilities of reSOURCE PARTNER, Inc.,
Interliant issued, as partial consideration, 1,041,179 shares of Common Stock to
certain stockholders of reSOURCE PARTNER, Inc.

     In June 2000, in connection with the acquisition of Knowledge Systems,
Inc., Interliant issued, as partial consideration, 46,407 shares of Common Stock
to certain stockholders of Knowledge Systems, Inc.

     During the six months ended June 30, 2000, in connection with the
attainment of certain earnout targets, Interliant issued, as partial
consideration, 37,482 shares of Common Stock to stockholders of Net Daemons
Associates, Inc, 3,398 shares of Common Stock to stockholders of The Daily-e
Corporation, 11,550 shares of Common Stock to stockholders of Sales Technology
Ltd., 44,458 shares of Common Stock to stockholders of Triumph Technologies,
Inc., and 13,179 shares of Common Stock to stockholders of Digiweb, Inc.

     Interliant believes that the transactions described above were exempt from
registration under the Securities Act pursuant to Section 4(2) of the Securities
Act, Regulation D or Rule 144A promulgated thereunder, as transactions by an
issuer not involving public offering, or pursuant to Rule 701 promulgated under
Section 3(b) of the Securities Act, as transactions pursuant to written
compensatory benefit plans and contracts relating to compensation. The
recipients of securities in each of these transactions represented that they
were acquiring the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the securities certificates issued in such transactions. All
recipients had adequate access, through their relationships with Interliant, to
information about Interliant, or were given an adequate opportunity to review
information about Interliant.

ITEM 5.    OTHER INFORMATION.

     For information concerning acquisitions refer to Footnote 3 to the
Consolidated Financial Statements for the six months ended June 30, 2000,
included in Part I of this Form 10-Q and incorporated herein by reference.

                                       17
<PAGE>

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.

               (a.) Exhibits -
                       Exhibit 27 - Financial Data Schedule (for SEC Use Only)


               (b.) Reports on Form 8-K:

                       Form 8-K/A, dated May 2, 2000 relating to the
                       acquisitions of Soft Link, Inc. and reSOURCE PARTNER,
                       Inc.

                                       18
<PAGE>

                                   SIGNATURES



Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                        Interliant, Inc.


Date:  August 11, 2000                  /s/ Herbert R. Hribar
                                        --------------------------------
                                        Herbert R. Hribar
                                        Chief Executive Officer and President


Date:  August 11, 2000                  /s/ William A. Wilson
                                        --------------------------------
                                        William A. Wilson
                                        Chief Financial Officer

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